In 2018, the controller of Sytec Corporation discovered that $42,000 of inventory purchases were incorrectly charged to

Question:

In 2018, the controller of Sytec discovered that $42,000 of inventory purchases were incorrectly charged to advertising expense in 2017. In addition, the 2017 year-end inventory count failed to include $30,000 of company merchandise held on consignment by Erin Brothers. Sytec uses a periodic inventory system. Other than the omission of the merchandise on consignment, the year-end inventory count was correct. The amounts of the errors are deemed to be material.
Required:
1. Determine the effect of the errors on retained earnings at January 1, 2018. Explain your answer. (Ignore income taxes.)
2. Prepare a journal entry to correct the errors.
3. What other step(s) would be taken in connection with the correction of the errors?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...